Slowdown changes dynamics of residential market
The residential market, which was touted to be a recession-free asset class until a few years ago, gave in to market realities during the past couple of years.
Over-supply and demand-supply mismatch
Over the past two years, unsold inventories of residential units have escalated to levels that were unsustainably high and it continues to remain there for a very long time. For instance, an unsold inventory of around 18-20 months is typically considered normal in today’s circumstances.
Price rise
Continuous rise in prices, in many cases faster than the rise in incomes and inflation, resulted in homes becoming unaffordable across major city centres. Even the cost of construction index also indicates that there has been a consistent rise in the price of construction materials. Therefore, while the outcome was that the demand slowed down, unaffordability, product-mismatch and the lack of market confidence amongst potential homebuyers were the key game spoilers in the residential markets.
Regulatory concerns
Undoubtedly, the residential sector is undergoing a period of relative stress. Endemic and regulatory concerns have been at the heart of issues currently impacting this asset class. Price stagnancy and falling sales are probably the indicators that the sector needs to improve its performance and address the trust deficit it currently faces from its consumers. - by Anuj Puri
(The writer is Chairman & Country Head, JLL India)
Source :- The Tribune
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